CORPORATE RESTRUCTURING UNDER

THE INSOLVENCY AND BANKRUPTCY

CODE 2016

SUBMITTED TO
Mr. V. Suryanarayana Raju
Faculty, Corporate Legal System, H.N.L.U Raipur

SUBMITTED BY
Pragya Markandey
Roll No. 100
ID No. 018/2018/1816
Semester VII, B.A. L.L.B (Hons.)

Date of Submission – 10th November 2021

HIDAYATULLAH NATIONAL LAW UNIVERSITY ATAL

NAGAR, CHHATTISGARH
 TABLE OF CONTENTS

S.No. Topic Page No.

1. Introduction 1

2. Criminal Justice System And Its Evolution In India : A Broad 5

Overview
3. The Principles of Natural Justice 7
4. Other Facets of Principles of Natural Justice Principles 12
5. Criminal Justice System Vis-a-Vis Principles of Natural Justice 14
(i) Rule Against Bias
(ii) Audi Alteram Partem
(a) Notice
- Charges
- Information of the grounds of arrest/accusation
- Right to get a copy of relevant documents
(b) Hearing
- Disclosure of materials
- Cross-Examination
- Right against torture, inhumane treatment,
custodial death etc.
- Reasoned Decision
6. Conclusion, Findings and Suggestions 23
7. References 24

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 1. INTRODUCTION

“Efficient, reliable and transparent creditor rights and insolvency systems are of key
importance for the reallocation of productive resources in the corporate sector, for investor
confidence and forward-looking corporate restructuring. These systems also play a pivotal
role in times of crisis to enable a country and stakeholders to promptly respond to and
resolve matters of corporate financial distress on systemic scales.”1

In legal terminology, the situation where the liabilities of a person or firm exceed its assets, is
known as insolvency. In practice, however, insolvency is the situation where an entity cannot
raise enough cash to meet its obligations, or to pay debts as they become due for payment.
Properly called technical insolvency, it may occur even when the value of an entity's total
assets exceeds its total liabilities.2 Insolvency law is often referred as the constitution of
commercial laws and forms a key component in the financial architecture of the country.
Particularly for an emerging economy, the existence of an efficient insolvency regime has
vital economic ramifications. Investors draw confidence from an insolvency system to take
risks and make crucial economic decisions. Absence of a well-functioning insolvency law
can impact the availability of cost-effective credit, which is often crucial to the sustainable
development of an emerging economy.3

The journey of Indian insolvency reforms has been slow and incremental. The legal
framework for insolvency remained fragmented and ineffective for decades, even as reforms
in the other areas of economic laws moved rapidly after the liberalisation of the Indian
economy in 1991. The key principles that help in the formation of a sound insolvency law
were either missing or fragmented. The restructuring and liquidation proceedings were
cumbersome and marred by lengthy court processes. Average life of cases recommended for
restructuring took between 4 to 8 years and those recommended for winding up even longer,
while it is only 1.7 years in high-income OECD countries.4

1
World Bank Principles for Effective Insolvency and Creditor Rights Systems, www.worldbank.org/gild.
2
Insolvency, BusinessDictionary, http://www.businessdictionary.com/definition/insolvency.html.
3
SUMANT BATRA, CORPORATE INSOLVENCY – LAW AND PRACTICE XLIX (2017).
4
Study on Insolvency Systems in the Middle-East and North Africa, OECD,
https://www.oecd.org/daf/ca/corporategovernanceprinciples/44375185.pdf.

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1.A. – Review of Literature

Tyagi, Vivek. (2018). Corporate Insolvency Resolution Procedure under Indian

Insolvency and Bankruptcy Code, 2016: A Comparative Perspective. The Indian
Insolvency and Bankruptcy Code, 2016 (IBC) is a salutation overhaul for Sick Industrial
Companies Act, 1985 (SICA) that offers a homogeneous and inclusive legislation, which
encircle all the companies, corporate, limited liability partnerships and individuals. In the
present article, the author has deliberated upon the Corporate Insolvency Resolution
Procedure under Indian Insolvency and Bankruptcy Code, 2016 vis-à-vis other jurisdictions.

Srijan Anant, Aayushi Mishra (2019): The researcher opines that IBC is one of the major
reforms brought about in the legal system in India .In the views of the author IBC is not only
giving strength to the Legal system in India but is also providing a new identification and
recognition to India at the global level . The author opines that the code brings about a
consolidation of the existing multiple laws relating to bankruptcy into a single law.The author
has analysed the key features of the code and the legal framework of the codes.The author
has also tried to analyse the impact of Insolvency and Bankruptcy code on macro
environment of India.

1.B. – Research Objectives

The broad objectives of this research project are:

1. To lay down comprehensively the stages under the Corporate Insolvency Resolution
Process under the Insolvency laws of India;
2. To elucidate on the provisions relating to declaration of Moratorium and Resolution
Plan under the Insolvency and Bankruptcy Code, 2016;
3. To study the effect of the Insolvency Code on Corporate Restructuring in general,
particularly through the Moratorium and Resolution Plan provisions;
4. To analyze the judicial interpretations of the provisions of the Insolvency Code and
their effect on restructuring exercises.

1.C. – Research Questions

1. What is the Corporate Insolvency Resolution process?

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 2. What are the provisions relating to declaration of Moratorium and Resolution Plan
under the Insolvency and Bankruptcy Code, 2016?
3. What is the effect of the Insolvency Code on Corporate Restructuring in general,
particularly through the Moratorium and Resolution Plan provisions?
4. What are the judicial interpretations of the provisions of the Insolvency Code and
their effect on restructuring exercises?

1.D. Methodology

The research methodology adopted for this research project is Doctrinal. The research is
based on both primary and secondary sources of data. There has been an extensive use of
authoritative texts, reports, journals, online articles, etc. The mode of citation that has been
followed is the Bluebook form of citation (19th Edition).

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 CHAPTER I – THE CORPORATE INSOLVENCY RESOLUTION PROCESS

THE INSOLVENCY RESOLUTION PROCESS

The Corporate Insolvency Resolution Process (“CIRP”) as provided for under the
Insolvency and Bankruptcy Code (“IBC”), can be described with the help of the following
figure:5

As regards who may apply, the IBC prescribes initiation of the CIRP through an application
by any of the following:

(i) Financial creditor,

(ii) Operational creditor,
5
Interpreting the Code – Corporate Insolvency in India, EY (Jan., 2017),
http://www.ey.com/Publication/vwLUAssets/ey-interpreting-the-insolvency-and-bankruptcy-code/$FILE/ey-
interpreting-the-insolvency-and-bankruptcy-code.pdf.

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 (iii) Corporate debtor

Accordingly, it is clear that procedures can be started both by creditor(s) or borrower.

Monetary leaser, under the Insolvency Code "signifies any individual to whom a monetary
obligation is owed and incorporates an individual to whom such obligation has been lawfully
doled out or moved to." Operational loan boss, under the Insolvency Code "signifies an
individual to whom a functional obligation is owed and incorporates any individual to whom
such obligation has been legitimately relegated or moved."

A corporate individual then again signifies "organization as characterized in provision (20) of

segment 2 of the Companies Act, 2013, a restricted responsibility association, as
characterized in proviso (n) of sub-segment (1) of segment 2 of the Limited Liability
Partnership Act, 2008, or some other individual consolidated with restricted risk under any
law for the time being in power however will exclude any monetary specialist co-op."

Accordingly, in Sgl Carbon Corpn., re, the Court excused the organization's Chapter 11 case
on account of dishonesty exhibited by an absence of "redesign reason". A huge organization
may likewise be driven into procedures automatically if three leasers holding unstable
noncontingent, undisputed cases amassing more than $12300 record a compulsory appeal
against the organization and if the organization is for the most part not paying its obligations
as they become due.

The whole cycle might be summed up in the accompanying advances:

1. An Application for commencement of CIRP can be by any of the candidates referenced

above u/s 7/9/10 of the IBC.

2. Functional bank needs to give request notice of 10 days to corporate indebted person prior
to moving toward the NCLT.

3. Corporate bankruptcy process will be finished inside 180 days of affirmation of utilization
by NCLT. Endless supply of use by NCLT, Creditors' cases will be frozen for 180 days,
during which time NCLT will hear proposition for recovery and settle on the future game-
plan.

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4. NCLT designates a break Insolvency Professional (IP) upon affirmation by the Insolvency
and Bankruptcy Board inside 14 days of acknowledgment of utilization.

5. NCLT makes public declaration be made of the inception of corporate indebtedness

interaction and calls for accommodation of cases by some other lenders.

6. Subsequent to getting claims as per public declaration, interval IP comprises the banks'
advisory group.

7. Lenders' council will meet first inside seven days of its constitution and choose by 75% of
votes either to supplant or affirm between time IP as Resolution Professional.

8. The banks' panel needs to then take choices in regards to bankruptcy goal by a 75% greater
part casting a ballot.

9. Goal Professional will get ready data reminder to empower goal candidate to get ready
goal plan.

10. When a goal is passed, the leasers' board needs to settle on the rebuilding system that
could either be an updated reimbursement plan for the organization, or liquidation of the
resources of the organization.

11. The goal plan will be shipped off NCLT for conclusive endorsement, and carried out once
supported.

CHAPTER II – MORATORIUM PERIOD AND RESTRUCTURING

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“According to the Merriam Webster dictionary, Moratorium means a legally authorised
period of delay in the performance of a legal obligation or the payment of a debt. 6 Modern
forms of corporate rehabilitation impose a freeze on right of creditors to proceed against the
debtor. The essential objectives of an effective insolvency law are to protect the value of the
insolvency estate against diminution by the actions of the various parties to insolvency
proceedings and facilitate administration of those proceedings in a fair and orderly manner.
The parties from which the estate needs greatest protection are the debtor and its creditors.”7

“The Bankruptcy Law Reforms Committee has incorporated some of the World Bank
recommendations in its report and the same assists in constructing the legislative intent
behind the provision.” It observed, “The motivation behind the moratorium is that it is value
maximising for the entity to continue operations even as viability is being assessed during the
IRP. There should be no additional stress on the business after the public announcement of
the IRP.”8

The Supreme Court has observed that the intent behind the moratorium was “to provide the
debtors a breathing spell in which he is to seek to reorganize his business,”

“The provisions in respect of moratorium are contained in Sections 13 and 14 of the IBC.
Section 13 provides for passing of an order of moratorium by the NCLT after an application
for commencement of CIRP is admitted.”

In Alpha & Omega Diagnostics (India) Ltd. v Asset Reconstruction Company of India Ltd. &
Ors.,9 the NCLAT was faced with the question of whether properties not owned by the
Corporate Debtor would come within the scope of moratoriums under the Code.

CHAPTER III – RESOLUTION PLAN AND ITS EFFECT ON RESTRUCTURING

6
Moratorium, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/moratorium.
7
UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation, UNCITRAL
(Jan., 2014), http://www.uncitral.org/pdf/english/texts/insolven/1997-Model-Law-Insol-2013-Guide-Enactment-
e.pdf.
8
Report of the Bankruptcy Law Reforms Committee, IBBI.GOV.IN (Nov. 2015),
http://ibbi.gov.in/BLRCReportVol1_04112015.pdf.
9
Company Appeal (AT) (Insolvency) No. 116 of 2017.

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“A central part of company financial condition resolution method is that the resolution
arrange, conjointly normally spoken because the shakeup or restructuring plan in few
jurisdictions. A restructuring plan is the appendage of the reorganisation proceedings,
addressing the disburse of a dividend fully and final settlement of all claims and also the final
structure of the business when the reorganisation is complete in accordance with the terms set
down in it. it's going to be created binding by law or by a writ to the assorted parties
involved.”
beneath the IBC, the duties of a resolution professional are set down as follows:
“(1) It shall be the duty of the resolution skilled to preserve and defend the assets of the
company debtor, as well as the continuing business operations of the corporate debtor.
(2) For the needs of sub-section (1), the resolution professional shall beneathtake the
subsequent actions, namely:
associate info note may be a document ready by the RP to that all Resolution arranges have to
be compelled to change to.

CASE ANALYSIS
Recently, the Hyderabad-bench of the NCLT accepted the primary Resolution Plan planned
under the first petition under the IBC, albeit with some modifications.
Facts –
The company, Synergies-Dooray Automotive restricted (“SDAL”), that manufactures alloy
wheels for cars, submitted its application to NCLT on January a pair of3. this can be the
primary case filed at any of the NCLT benches, beneath the new financial condition code.
The resolution arrange was submitted by the corporate on July 21, and accepted by the court
on August 2 - among the prescribed amount of a hundred and eighty days. , because it was
approved by a gathering of the Committee of Creditors on twenty four Gregorian calendar
month 2017.
control –
The NCLT analysed the Resolution arrange which included the subsequent –
(1) uniting of SDAL and SCL;
(2) Payment of financial condition method prices higher than different debts;
(3) Payment to monetary creditors along side interest over a amount of three years;
(4) Payment of statutory dues;
(5) Payment to operational creditors;

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(6) Resolution human (SCL) is that the renter of SDAL and can still use and operate the
facilities of SDAL;
(7) Lesser money outage, as Resolution human (SCL) is one in all the foremost financial
creditors of SDAL (since SCL contains a 9.18% share of debts owed to the CoC, SCL is a
major secured lender); and
(8) continuing employment of SDAL’s workmen.

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 CHAPTER IV – SOME CONCERNS UNDER THE CODE

The Chairperson of the Insolvency and Bankruptcy Board of India ("IBBI"), Mr. M S Sahoo
had said that consolidations and acquisitions may increment under the code. Inspite of these
assertions, there are still a few worries which should be tended to. They are as per the
following:

(1) The issue of threatening advertisers/the executives can't be wished away

The confirmation of the corporate indebtedness goal process by the National Company Law
Tribunal (NCLT) signals the initiation of the resource deal process under the Bankruptcy
Code.

(2) Freeze on M&A during the ban time frame

In the period after the NCLT concedes and launches the bankruptcy goal process, the
corporate debt holder will be blocked from selling its organizations/related resources until the
expiry of a ban time of 180 days or until a deal cycle is supported by the NCLT.

(3) No stamp obligation unwinding

There is no special case for installment of stamp obligation and other legal expenses
corresponding to procurement of resources under the Bankruptcy Code.

(4) Inquiries over congruity of business

Any procurement of resources by a purchaser under the Bankruptcy Code—despite the fact
that endorsed by the NCLT—may not bring about programmed move of government assents,
licenses, client and outsider agreements.

(5) Loan boss dynamic, issue of bounty

For an offer of a business under the Bankruptcy Code, 75% of the lenders' council should
endorse such an arrangement. This is a high edge, particularly contrasted with the

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Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
(SARFAESI) Act, which requires endorsement just of 60% of got lenders.

CONCLUSIONS

It is clear that the section of the Insolvency and Bankruptcy Code, 2016 is a positive
development by the public authority. Right now, probably the greatest issue keeping the
economy down is that of Non-Performing Assets (NPAs) and terrible advances. Likewise,
loan specialists are careful about crisp loaning and because of the immense variety of laws
and fora, the rebuilding practices embraced towards obligation goal are difficult and since a
long time ago drawn. The IBC, by commanding the culmination of the goal cycle inside 180
days (with limit of 270 days), and furthermore including arrangements for quick track goal of
specific elements, has taken out one of the hardships of the goal interaction. As a rule,
corporate rebuilding, which is one of the most turned to rehearses under water goal, has been
helped incredibly by the IBC. Notwithstanding, there are sure getting teeth gives that actually
still need to be tended to. Probably the best downside of the IBC is the shortfall of functional
banks from the Committee of Creditors to be comprised under the Code. Besides, pre-pack
courses of action, which are somewhat normal among different wards, are outstandingly
missing in India and have indeed, been disallowed under the IBC. Subsequently, it would get
the job done to say that the IBC is most certainly a positive development as it speeds up the
whole course of M&A as a feature of the Corporate Insolvency Resolution Process since it
sets out the substance of a data notice and a goal plan and commands the protecting of the
resources through the revelation of a ban, which likewise guarantees equivalent treatment,
everything being equal, and petitioners on the properties, and so forth of the corporate
indebted person. Notwithstanding, there still stay a couple of issues which should be settled
quickly to empower the Tribunals to determine the awful advances and NPA issues without a
hitch and as per value.

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 BIBLIOGRAPHY

This project report would not have achieved its objectives without the following authorities:

 ACTS/RULES/REGULATIONS
1) Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
2) Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016.
3) The Arbitration and Conciliation Act, 1996
4) The Insolvency and Bankruptcy Code, 2016.

 BOOKS
1) SUMANT BATRA, CORPORATE INSOLVENCY – LAW AND PRACTICE (2017).

 CASES
1) Alpha & Omega Diagnostics (India) Ltd. v Asset Reconstruction Company of India
Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 116 of 2017.
2) Innoventive Industries Ltd v. ICICI Bank Ltd, Civil Appeal Nos. 8337-8338 of 2017.
3) Sanjeev Shriya v. State Bank of India and Ors., Civil Writ Petition No. 30285 of
2017.
4) Schweitzer Systemtek India Pvt. Ltd. v. Pheonix ARC Pvt. Ltd. & Ors., Company
Appeal (AT) (Insolvency) No. 129 of 2017.
5) Sgl Carbon Corpn., re, 200 F. 3d 154 (3rd Cir. 1999).

 WEBPAGES
1) http://smartinvestor.business-standard.com/market/story-471034-storydet
MAs_to_increase_under_insolvency_code_says_IBBI_chief_M_S_Sahoo.htm#.WaQ
98ygjHIU.
2) http://suncapira.co.in/mergers-and-acquisitions-under-bankruptcy-code-some-
concerns/.
3) http://www.businessdictionary.com/definition/insolvency.html.
4) http://www.ey.com/Publication/vwLUAssets/ey-interpreting-the-insolvency-and-
bankruptcy-code/$FILE/ey-interpreting-the-insolvency-and-bankruptcy-code.pdf.

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5) http://www.hsalegal.com/wp-content/uploads/2017/04/Insolvency-and-Bankruptcy-
Code-2016_066217.pdf.
6) http://www.livemint.com/Industry/qHRj0OlhehKDXFXFlckkoJ/NCLT-okays-first-
insolvency-resolution-scheme-underIBC.html.
7) http://www.livemint.com/Opinion/XhU7eXX6xGATjdpRSUyRIN/Mergers-and-
acquisitions-under-Bankruptcy-Code-some-concern.html;
8) http://www.mondaq.com/india/x/622884/Insolvency+Bankruptcy/
A+Valid+Resolution+Plan+The+Ideal+Mix.
9) http://www.moneycontrol.com/news/trends/legal-trends/nclt-approves-first-
insolvency-resolution-plan-under-insolvency-bankruptcy-code-2361065.html.
10) http://www.nishithdesai.com/information/news-storage/news-details/article/
guarantors-and-the-moratorium-under-the-bankruptcy-code-an-on-going-battle.html.
11) https://barandbench.com/first-resolution-plan/.
12) https://indiacorplaw.in/2017/08/analysis-first-insolvency-resolution-scheme-
insolvency-bankruptcy-code.html.
13) https://www.merriam-webster.com/dictionary/moratorium.
14) https://www.oecd.org/daf/ca/corporategovernanceprinciples/44375185.pdf.
15) https://www.thecompaniesact2013.com/uploads/1481524464_ibc%20Article
%201.pdf.

 ARTICLES/ RESEARCH PAPERS

1) Philip R. Wood, Principles of International Insolvency, II INTERNATIONAL
INSOLVENCY REVIEW (2013).

 MISCELLANEOUS DOCUMENTS

1) Principles for Effective Insolvency and Creditor/Debtor Regimes, WORLD BANK

(2016), http://pubdocs.worldbank.org/en/919511468425523509/ICR-Principles-
Insolvency-Creditor-Debtor-Regimes-2016.pdf.
2) Report of the Bankruptcy Law Reforms Committee, IBBI.GOV.IN (Nov. 2015),
http://ibbi.gov.in/BLRCReportVol1_04112015.pdf.
3) UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and
Interpretation, UNCITRAL (Jan., 2014),

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 http://www.uncitral.org/pdf/english/texts/insolven/1997-Model-Law-Insol-2013-
Guide-Enactment-e.pdf.
4) World Bank Principles for Effective Insolvency and Creditor Rights Systems,
www.worldbank.org/gild.

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